Most guides tell you the same thing: the longer you commit, the lower your rate. In Texas right now, that is backwards. A 24-month plan can be cheaper per kWh than a 6-month plan, or it can cost more, and in much of 2026 it cost more.
Here is what each contract length means for your wallet and your flexibility, and how to check which way the spread is running before you sign.
How Contract Length Affects Your Rate
Electric companies price contracts on risk and on where they expect wholesale power to trade over the term. When the forward market is flat or falling, a longer commitment earns you a lower rate. When forward prices are rising, as they have been since August 2025, longer terms cost more, not less.
A note on the numbers in this guide. The current-market figures below come from two snapshots: average marketplace rates from Gatby on September 10, 2026, and ComparePower’s cheapest offers from August 2026. That is one marketplace on one day plus one competitor’s board, not a long-run study. It is enough to show that the usual “longer equals cheaper” rule is not holding, and it is not a substitute for checking the spread in your own ZIP code before you sign.
Here is what that Gatby snapshot showed, average rate by term:
| Contract Length | Average Rate (per kWh) | Monthly Cost (1,000 kWh) | Annual Cost |
|---|---|---|---|
| 6 months | 13.9 cents | $139 | $1,668 |
| 12 months | 15.3 cents | $153 | $1,836 |
| 24 months | 15.7 cents | $157 | $1,884 |
| 36 months | 16.4 cents | $164 | $1,968 |
The ladder runs the wrong way for long terms. ComparePower’s board told the same story from the cheap end: its lowest 12-month offer was 10.1 cents, its lowest 24-month 10.2, and its lowest 36-month 10.4. TXU’s Smart Deal 24 listed 0.4 cents above its Smart Deal 12 in Dallas.
Those are averages and floor prices across a whole market. What a typical shopper can actually sign is somewhere in between: competitive 12-month fixed plans run about 12 to 15 cents per kWh.
The spread between the shortest and longest terms has been about 1 to 3 cents per kWh, which is $10 to $30 a month at 1,000 kWh. That is real money in either direction. A longer term only captures it if the longer rate is genuinely lower and you stay the full term.
6-Month Contracts: Maximum Flexibility
Six months is short enough to escape a bad deal and long enough to lock in a fixed rate. Here is when that trade-off works in your favor.
Who They’re For
Six-month contracts work best when your situation is uncertain. You might be moving, your lease might not get renewed, or you might want to try a new electric company without a long commitment.
The Trade-Offs
Rates that can run either way: The textbook pattern is that you pay a premium for a short term. That is not what the current market shows. In the September snapshot, 6-month plans averaged 13.9 cents against 15.3 cents for 12-month plans, so the short term was the cheaper one. Check both before you assume.
Lower ETFs: Early termination fees on short contracts tend to be smaller. Most 12-month plans carry a flat $150 fee, 24-month plans about $295, and 36-month plans up to $395 at the largest companies (TXU, Reliant, Gexa, Direct). Some companies, such as Rhythm, charge about $20 per month remaining instead, which makes leaving a short contract early cheaper still.
More frequent shopping: Your contract expires twice a year. That is twice you need to compare plans or get rolled onto month-to-month pricing. See our guide on what happens when your contract expires.
When 6-Month Contracts Make Sense
- Your lease ends in 6-8 months
- You’re new to Texas and want to understand your usage patterns before locking in
- You want to reassess after your first Texas summer
- You’re unhappy with your current electric company and want a trial run with someone new
Real-World Scenario
You moved to Dallas in March. You have no idea what your summer electricity usage looks like in a Texas home. A 6-month contract gets you through summer on a fixed rate, and you will have real usage data by September to make a smarter 12-month decision.
12-Month Contracts: The Sweet Spot
Most shoppers land here. ChooseTexasPower reports that 12-month plans are the most-ordered term across two years of its marketplace data.
Why Most People Choose 12 Months
Twelve-month contracts balance rate savings against commitment risk better than any other option. The rate is reliably below month-to-month pricing, and the commitment is short enough that most life changes, such as lease renewals, job changes, and family moves, line up with annual cycles.
They also carry the market’s standard early termination fee, which makes the cost of changing your mind easy to calculate.
The Trade-Offs
Middle-of-the-market rates: In the September snapshot, 12-month plans averaged 15.3 cents, above 6-month plans at 13.9 and below 24-month plans at 15.7. In a falling forward market the order flips and 12-month plans sit above the longer terms. Neither arrangement is permanent.
Standard ETFs: Most 12-month plans carry a flat $150 early termination fee. That is enough to think twice about switching, and small enough that switching can still pay if the rate gap is wide. See our guide on early termination fees for the break-even calculation.
Annual shopping required: You compare plans once a year when your contract expires. That is manageable for most people.
When 12-Month Contracts Make Sense
- You’re settled in your home and planning to stay at least a year
- You want a competitive rate without a multi-year commitment
- You like checking in on rates annually but don’t want to do it more often
- Your lease is 12 months
Timing Matters Less Than You Think
Plenty of guides will tell you to sign in a particular month. Three years of Texas retail price data do not support it: the cheapest month was December in 2024, January in 2025, and August in 2026, and the whole spread inside a year has run about a cent or two per kWh. Shop when your contract ends and compare the offer against what the market is showing that week. See when Texas electricity rates go up for the month-by-month numbers.
What does cost real money is letting the contract lapse onto month-to-month pricing, which runs 2 to 4 cents per kWh above a fixed plan.
Companies like TXU Energy, Gexa Energy, and Frontier Utilities all offer competitive 12-month fixed-rate plans. Compare them side by side in our Gexa vs TXU and Frontier vs Rhythm comparisons.
24-Month Contracts: Longest Lock-In, Not Always the Lowest Rate
Two years is a long bet on both your living situation and the energy market. Sometimes the market pays you for it. Sometimes it charges you.
Who They’re For
Twenty-four month contracts suit homeowners and long-term renters who want to stop thinking about electricity, and who are confident they will not need to break the contract.
The Trade-Offs
Rates that may or may not be lower: When the forward market cooperates, a 24-month plan prices below the 12-month option and the saving compounds over two years. Confirm that discount exists before you count on it. In the September snapshot, 24-month plans averaged 15.7 cents against 15.3 for 12-month plans, and ComparePower’s cheapest 24-month offer sat a tenth of a cent above its cheapest 12-month.
Higher ETF exposure: Early termination fees on 24-month contracts are often $295 or more. On a per-month structure at about $20 per remaining month, leaving after just 3 months would cost $420.
Market risk: You are betting that rates will not fall during your term. If 12-month rates drop two cents while you are locked in, you are stuck watching.
Life changes: Two years is a long time. Job transfers, family changes, and home purchases all force early exits, and every one of them costs the fee.
When 24-Month Contracts Make Sense
- You own your home and aren’t planning to move
- The 24-month rate is genuinely below the 12-month rate in your ZIP code
- You value set-it-and-forget-it simplicity
- You’re comfortable with the ETF risk
When to Avoid Them
- You’re renting with a standard 12-month lease
- The longer term costs more, which it did through much of 2026
- Your employment situation is uncertain
- You’ve never lived in your current home through a full summer, so you don’t know your true usage yet
36-Month Contracts: The Long Game
Natural gas, the fuel that sets most Texas power prices, averaged $2.57 per MMBtu at Henry Hub in 2023, spiked to $7.72 in January 2026, and was back to $2.90 by September 1, 2026 (EIA and FRED). That is the gamble you are making with a 36-month contract. A few companies offer them, such as TXU’s Smart Deal 36 and APG&E’s SimpleSaver 36, usually pitched as the lowest rate in the lineup.
Three years is a long time in the Texas market. Wholesale prices move, new companies enter, rules change, and your life changes too.
Right now the extra year does not even buy a discount. In the September snapshot, the average 36-month offer priced above the average 24-month offer, 16.4 cents against 15.7, and ComparePower’s cheapest 36-month plan sat 0.2 cents above its cheapest 24-month plan. Even when a small discount does exist, it rarely compensates for the extra year of lock-in and the larger fee to escape it.
Month-to-Month: No Contract at All
Freedom has a price tag, typically 2 to 4 cents per kWh. TXU’s month-to-month Flex Forward listed at 19.6 cents in Houston, against 14.5 to 17.2 cents for its 12-month plans. Month-to-month plans, also called variable-rate plans, have no commitment and no early termination fee, but the price can change every billing cycle.
At 1,000 kWh a month, that premium adds $240 to $480 a year compared with a 12-month fixed plan.
Month-to-month works as a bridge, between contracts, between moves, or while you shop. It is expensive as a permanent choice. See our full breakdown in fixed vs variable rate plans.
How to Choose the Right Length
Four factors separate a smart contract choice from an expensive one. Work through each before you sign.
Factor 1: How Long Are You Staying?
Match the contract to your housing timeline:
- Moving in 3-6 months: Month-to-month or a 6-month contract
- 12-month lease: 12-month contract, timed to expire with your lease
- Own your home: 12 or 24 months, depending on which one is actually cheaper
Factor 2: Which Way Is the Spread Running?
Pull up 6-, 12-, 24-, and 36-month offers in your ZIP code and put them side by side. If the longer terms price lower, a longer lock rewards you. If they price higher, as they did through much of 2026, the extra commitment buys nothing.
You can check current offers on ComparePower.
Factor 3: What’s Your Risk Tolerance?
A longer lock trades optionality for certainty. If rates fall, you miss it. If rates climb, you are protected. There is no universally right answer, only the one that matches how much you value knowing your rate a year from now.
Factor 4: What’s the ETF Structure?
A flat $150 fee on a 24-month contract behaves very differently from about $20 per remaining month. With a flat fee, the penalty is the same whether you leave in month 2 or month 22. With per-month pricing, leaving early is expensive and leaving late is almost free.
Per-month fees favor longer contracts, because the penalty shrinks as you approach the end. Flat fees make shorter contracts less risky.
The Contract Length Decision Matrix
Not sure where you land? Match your situation to the right contract length.
| Your Situation | Best Contract Length | Why |
|---|---|---|
| New to Texas, first summer | 6 months | Learn your usage before committing |
| Standard 12-month lease | 12 months | Matches your housing commitment |
| Homeowner, longer terms priced lower | 24 months | Lock in the discount while it exists |
| Homeowner, longer terms priced higher | 12 months | Don’t pay extra for a longer lock |
| Moving in 3 months | Month-to-month | Avoid any ETF risk |
| Between contracts | Month-to-month | Bridge until you find the right plan |
The Bottom Line
For most Texas households, 12-month contracts offer the best balance of price and flexibility. You get a meaningful discount over month-to-month pricing, the standard $150 fee if you need out, and a fresh look at the market every year.
Stretching to 24 months is worth it in exactly one case: the 24-month rate in your ZIP code is actually lower than the 12-month rate. Check that, because through much of 2026 it was not. If it is lower and you know you are staying put, take it, as long as you are comfortable with the $295 fee should life throw you a curveball.
The worst move is defaulting to month-to-month because you never got around to shopping. That inertia costs Texas households hundreds of dollars a year.
Ready to compare contract options? Head to ComparePower to see current rates at different contract lengths in your area.
Frequently Asked Questions
What is the most common electricity contract length in Texas?
Twelve months. It is the most-ordered term in ChooseTexasPower’s marketplace data, and the reasons are practical: a solid discount over month-to-month pricing, usually 2 to 4 cents per kWh, a commitment most people can predict, and a standard $150 early termination fee if plans change. Most leases run 12 months too, which makes the timing natural.
Can I switch electricity companies before my contract ends?
Yes, but you will pay an early termination fee: typically $150 on a 12-month plan and $295 to $395 on 24- and 36-month plans at the largest companies. Some companies charge about $20 per month remaining instead. Sometimes paying it still saves money if you are moving off a much higher rate, so do the math against your remaining overpayment. You can also switch with no fee at all during the final 14 days of your contract.
Do longer electricity contracts always have lower rates?
No. The jump from month-to-month to 12 months reliably saves money, usually 2 to 4 cents per kWh. Beyond that it depends on the forward market. Sometimes a 24-month plan prices below a 12-month plan; in September 2026 the average 24-month and 36-month offers both priced above the average 12-month offer. Compare the actual numbers in your ZIP code rather than assuming.
Should I sign a 24-month electricity contract?
Only if the 24-month rate is lower than the 12-month rate where you live, and you are confident you will stay put. If you are renting, might move, or the longer term is priced higher, a 12-month contract costs less and lets you renegotiate sooner.